24 Jan 2023 | Blog

You can break the pay-to-pay cycle

pay check

A study by Deloitte between November 2021 and January 2022, surveyed over 14,000 Millennials (born 1983 – 1994) and Gen Zs (born 1995 – 2003) worldwide.

The results were alarming: over 30% of respondents indicated that they did not feel financially secure, while 47% of millennials and 46% of Gen Zs lived paycheque-to-paycheque.

All said cost of living was their number one concern – ahead of climate change and unemployment.

It’s easy to assume that these are people earning lower wages, but that’s not always the case.

Meet Aaron

Physiotherapist Aaron had a cashflow issue. He loved technology and couldn’t resist any new gadget, even if he didn’t need it. Additionally, he had an active social life involving weekends away, dining out, theatre and concerts.

Consequently, Aaron’s credit card was maxed-out and he had lost track of his buy-now-pay-later (BNPL) plans.

After making his minimum monthly repayments, Aaron was forced to live on credit until next payday.

When his clapped-out car died it needed replacing. It was a wakeup call when the finance company rejected his loan application.

Aaron felt trapped with no way to break the pay-to-pay cycle. The worry kept him up at night and began affecting his work.

According to mental health support organisation, Beyond Blue, financial worries impact our physical and mental wellbeing, potentially leading to further financial stress.

Aaron’s adviser developed a debt-reduction strategy: if he sacrificed three nights out per week and the occasional weekend away, he’d be debt free within three years – one year if he never left the house!

But any plan must be workable, and they agreed that meeting half-way would be best. Aaron’s adviser recommended a weekly spending budget which would see Aaron debt-free in 18 months – provided he curb his passion for gadgets.

The simplicity of internet shopping, despite good intentions, means it’s easy to rack up debt without realising it. Any wonder Finder.com.au reports that 46% of Australians live from pay-to-pay!

If you’re trapped in the pay-to-pay cycle, reach out to a qualified financial adviser and remember that no situation is so dire that it can’t be fixed through budgeting, planning and professional advice.

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial adviser to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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